SEC, DOJ Blame Social Media Influencers Over Alleged $100M Fraud Scheme

The US Securities and Exchange Commission (SEC) seal is seen at its headquarters in Washington, DC on May 12, 2021.

Andrew Kelly | Reuters

Federal prosecutors and the Securities and Exchange Commission charged seven social media influencers with using Twitter and Discord to commit securities fraud that earned them more than $100 million in illicit profits.

The separate criminal and civil lawsuits also accuse another influencer of aiding and abetting the scheme, authorities said on Wednesday.

The seven accused of securities fraud used the social media platforms to manipulate exchange-traded stocks in a scheme dating back at least to January 2020, the SEC claimed. Through widespread Twitter accounts and stock trading chat rooms on Discord, the defendants allegedly “advertised themselves to be successful traders” and allegedly encouraged followers to buy stocks that they did, according to an SEC press release.

But they didn’t tell their followers when promoting those stocks that, according to the complaint, they allegedly planned to sell shares later once prices or trading volumes rose. The influencers allegedly made a profit by sending stock prices soaring and then selling as soon as they went up, making about $100 million in total, the SEC claims.

Department of Justice chart detailing those accused in alleged pump-and-dump fraud.

Ministry of Justice

Each of the defendants had well over 100,000 Twitter followers that month, the complaint said. One of those accounts, @PJ_Matlock, run by Texas resident Perry Matlock, who describes himself as the CEO of Atlas Trading, ceased to exist as of Wednesday. The other main defendants facing securities fraud charges (and their Twitter names) are Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne), Stefan Hrvatin (@ LadeBackk) and John Rybarcyzk (@Ultra_Calls).

Daniel Knight (@DipDeity) has been accused of aiding and abetting the alleged plan, in part by co-hosting a podcast that promoted some of the key suspects as skilled traders. The SEC alleged that Knight also traded with the other defendants and made profits from the scheme.

As of at least Wednesday, some of the defendants’ Twitter bios have included disclaimers that appear to attempt to mitigate their legal risks. For example, Constantin’s account says, “All my tweets are just my opinions. I’m still not a financial advisor. Spoof account.” Hennessey’s says, “All my opinions. I actively trade positions. Not a professional, not financial advice, probably do the opposite.” Rybarcyzks reads: “DISCLAIMER: My tweets are NOT recommendations to buy a stock. – Ideas shared on Twitter are NOT buy or sell signals. DO NOT ACT BASED ON SOCIAL MEDIA.”

Knight’s bio reads, “NEVER buy/sell my tweets.”

The eight people are also being charged by the Department of Justice Fraud Division and the US Attorney’s Office for the Southern District of Texas.

Twitter and Discord did not immediately respond to requests for comment.

Three of the influencers charged under the program who had open direct messages on Twitter, Deel, Rybarcyzk and Knight, did not immediately respond to CNBC’s requests for comment. Messages to Instagram accounts apparently linked to Matlock, Constantin, and Cooperman were not immediately replied to. A message to a LinkedIn account that appeared to be linked to Hennessey did not immediately respond to a request for comment. Contact information for Hrvatin could not be found immediately.

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